3D Systems, Inc. v. Wynne

[7] 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA [10] 11 3D SYSTEMS, INC., Case No.: 21-cv-1141-AGS-DDL 12 Plaintiff, ORDER: 13 v. (1) GRANTING PLAINTIFF’S [14] MOTION TO SEAL BEN WYNNE, et al., [15] Defendants. and [16] 17 (2) GRANTING DEFENDANTS’ MOTION TO SEAL [18] 19 [Dkt. Nos. 387, 397] [20] 21 I. 22 INTRODUCTION 23 Before the Court are Plaintiff’s Motion to Seal regarding certain exhibits filed in 24 support of Plaintiff’s Motion to Compel Forensic Inspection of Defendants’ Electronically 25 Stored Information (“Plaintiff’s Motion to Seal”) [Dkt. No. 387] and Defendants’ Motion 26 to Seal regarding certain documents submitted in support of their opposition to Plaintiff’s 27 Motion to Compel Forensic Inspection of Defendants’ Electronically Stored Information 28 (“Defendants’ Motion to Seal”) [Dkt. No. 397]. The Court GRANTS both motions. 1 II. 2 LEGAL STANDARDS 3 The public enjoys “a general right to inspect and copy public records and documents, 4 including judicial records and documents.” Nixon v. Warner Commc’ns, Inc., 435 U.S. 5 589, 597 (1978). When evaluating a request to seal judicial records, courts in this Circuit 6 start with “a ‘strong presumption in favor of access’” to those records. Kamakana v. City 7 & Cnty. of Honolulu, 447 F.3d 1172 , 1178 (9th Cir. 2006) (citation omitted). The party 8 requesting sealing bears the burden of overcoming this strong presumption. Id. The 9 showing required depends upon whether the underlying motion is closely related to the 10 merits of the case—in which case the party must demonstrate “compelling reasons” to 11 seal—or is only “tangentially related” to them, which requires a less demanding showing 12 of good cause. See Ctr. for Auto Safety v. Chrysler Group, LLC, 809 F.3d 1092 , 1097 13 (9th Cir. 2016). 14 III. 15 DISCUSSION 16 A. The “Good Cause” Standard Applies 17 Application of the “good cause” standard is appropriate where the court does not 18 address the merits of litigation in the underlying motion. See, e.g., In re Mahltig Mgmt. 19 Und Beteiligungsgesellschaft MBH, No. 18-mc-80037 NC, 2018 WL 11198061 , at *6 20 (N.D. Cal. Apr. 18, 2018). “Good cause” requires a “particularized showing that specific 21 prejudice or harm will result” if the information is disclosed. See Phillips ex rel. Estates 22 of Byrd v. Gen Motors Corp., 307 F.3d 1206, 1210-11 (9th Cir. 2002). “Broad allegations 23 of harm, unsubstantiated by specific examples of articulated reasoning,” do not satisfy the 24 good cause standard. Beckman Indus., Inc. v. Int’l Ins. Co., 966 F.2d 470, 476 (9th Cir. 25 1992). 26 The “good cause” standard applies to both parties’ motions to seal. The substantive 27 motion underlying the parties’ motions to seal is Plaintiff’s Motion to Compel Forensic 28 Inspection of Defendants’ Electronically Stored Information (“Motion to Compel”), 1 wherein Plaintiff “moves, pursuant to Federal Rule of Civil Procedure 37, to compel a 2 forensic inspection of electronically stored information . . . so that 3DS can obtain 3 documents that were previously requested and should have been produced in discovery by 4 Defendants.” Dkt. No. 389 at 3. The Motion to Compel only requires the Court to address 5 whether to permit Plaintiff to conduct a forensic inspection of certain electronically stored 6 information. The Court need not address the merits of the case to rule on the Motion to 7 Compel, nor will the Court’s ruling dispose of either party’s claims or restrict the evidence 8 either party may introduce at trial in support of its claims. 9 B. Plaintiff’s Motion to Seal 10 “‘[S]ources of business information that might harm a litigant’s competitive 11 standing’ often warrant protection under seal.” In re Mahltig Mgmt., 2018 WL 11198061 , 12 at *6 (citing Nixon, 435 U.S. at 598 ). Courts have granted motions to seal “third-parties’ 13 sensitive business information,” recognizing that disclosure “might allow competitors to 14 use that information to their advantage in their own contract negotiations,” Pulse 15 Electronics, Inc. v. U.D. Electronic Corp., 530 F. Supp. 3d 988 , 1031 (S.D. Cal. 2021) 16 (citation omitted), so long as the material to be sealed is narrowly tailored to such 17 confidential business information. See, e.g., Monster Energy Co. v. Vital Pharm., Inc., No. 18 EDCV 18-1882 JGB (SHKx), 2019 WL 3099711 , at *2 (C.D. Cal. June 17, 2019); see also 19 Rodman v. Safeway, Inc., No. 11-cv-03003-JST, 2015 WL 13673842 , at *2 (N.D. Cal. Aug. 20 4, 2015). 21 Plaintiff moves to seal Exhibits 6, 7, 8, 9, and 10 filed in support of its Motion to 22 Compel. Dkt. No. 387 at 3. Plaintiff describes the exhibits as “activity logs produced by 23 third-party PTC, Inc. and related testimony.” Id. As the Court recognized in a prior order 24 granting Plaintiff’s motion to seal similar records produced and designated as confidential 25 by third party PTC, Inc. (“PTC”), “[a]n order sealing the documents designated as 26 ‘confidential’ by non-party PTC is appropriate here given the sensitive nature of the 27 information contained in the documents and the effect that disclosure would have on PTC 28 and its customers.” Dkt. No. 254 at 3. 1 Here, Plaintiff states that “PTC designated the information contained in Exhibits 62 10 . . . as ‘CONFIDENTIAL’ and ‘CONFIDENTIAL – FOR COUNSEL ONLY’ and 3 expected the information would be filed under seal or not at all.” Dkt. No. 387 at 4; Dkt. 4 No. 387-1 at ¶ 14. In support of Plaintiff’s Motion to Seal, Plaintiff provides declarations 5 of Charles M. Urso, Senior Corporate Counsel at PTC (“Urso Declaration”) and David 6 Katzman, Divisional Vice President and Velocity Group General Manager at PTC 7 (“Katzman Declaration”). The Urso Declaration and Katzman Declaration explain that 8 PTC’s customers use its Onshape computer-aided design product “to design new products, 9 improve existing products, run analytics on proposed designs, and modify products based 10 on the results of the analytics.” Dkt. No. 387-1 at 6, ¶ 5; id. at 13, ¶ 8. Given this usage, 11 “PTC’s customers often consider this work and information to be highly confidential or 12 trade secrets, and critical for maintaining a competitive advantage relative to their peer 13 companies.” Id. at 6-7, ¶ 5; id. at 13, ¶ 8. Analytics data generated by customers in certain 14 industries “is particularly sensitive in that the analytics data, if made public, could be used 15 by bad actors to exploit the customer’s product, or the devices that incorporate the 16 customer’s product.” Id. at 7, ¶ 6; id. at 13, ¶ 9. 17 Additionally, the Urso Declaration and Katzman Declaration explain that in 18 response to Plaintiff’s subpoena dated March 16, 2023, “PTC provided a log file showing 19 individual events that took place within the relevant Onshape environments during the 20 relevant time period.” Dkt. No. 387-1 at 7, ¶ 8; id. at 13-14, ¶ 11. Irrespective of whether 21 a customer considers their own data to be confidential, “the format of the Log File itself, 22 the individual file characteristics that can be tracked by the Onshape platform, and the 23 format and syntax of the individual identifiers contained in the Log File are proprietary and 24 highly confidential to PTC.” Id. at 7, ¶ 10; id. at 14, ¶ 13. Thus, “[p]ublicly disclosing the 25 Log File in its complete form, even if certain columns remain redacted, could put PTC at 26 a competitive disadvantage by providing PTC’s competitors with information and a 27 roadmap showing how Onshape manages, categorizes, and persists events occurring within 28 the Onshape platform.” Id. at 8, ¶ 11; id. at 14, ¶ 14. Moreover, if disclosed, “the Log File 1 in its complete form . . . could be leveraged by bad actors attempting to gain access to 2 highly confidential or sensitive Onshape customer information.” Id. at 8, ¶ 12; id. at 14, ¶ 3 15. 4 Finally, Urso and Katzman describe the internal measures PTC has implemented to 5 maintain the security of its customers’ sensitive data. For example, “PTC personnel may 6 not access any customer data in the Onshape platform unless in connection with a Court 7 order or validly issued subpoena, a security-related emergency, or with a customer’s 8 explicit permission.” Dkt. No. 387-1 at 13, ¶ 10; id. at 7, ¶ 7. Moreover, “[u]nless PTC is 9 provided access by a customer, PTC personnel are not able to see actual models, analytics, 10 and other customer sensitive data without code-level changes to the Onshape platform.” 11 Id. at 13, ¶ 10. In the case of the log files produced in response to the March 16 subpoena, 12 “[t]he Log File, and the information therein, as compiled, is not available to individual 13 Onshape platform users or others outside of PTC,” and “even within PTC, only PTC 14 employees with VP-level or above permission are granted access to log files, and only in 15 cases where access is necessary” for the reasons listed. Id. at 14, ¶ 12; id. at 7, ¶ 9. 16 Based on the foregoing, the Court finds that Plaintiff has demonstrated good cause 17 for an order sealing Exhibits 6, 7, 8, 9, and 10. The Exhibits contain confidential 18 information regarding the proprietary format of PTC’s product and its customers’ 19 confidential and sensitive business information. The Urso and Katzman Declarations 20 explain how disclosure would expose PTC’s customers to bad actors hoping to exploit their 21 products and place PTC at a disadvantage in relation to their competitors by revealing 22 PTC’s proprietary product design. As such, Plaintiff has made the required particularized 23 showing of harm, and the materials Plaintiff requests to be sealed are narrowly tailored to 24 only the confidential business information of PTC and the individual customer whose 25 information is revealed in the materials. For these reasons, Plaintiff’s Motion to Seal at 26 Dkt. No. 387 is GRANTED. The Clerk of Court is respectfully requested to seal the 27 foregoing documents lodged at Dkt. No. 388 in their entirety. 28 / / / 1 C. Defendants’ Motion to Seal 2 Defendants move to seal a portion of the Declaration of Jeffrey J. Catalano in 3 Support of Defendants’ Opposition to Plaintiff’s Motion to Compel (“Catalano 4 Declaration”). Dkt. No. 397 at 2. Specifically, Defendants move to redact two images 5 depicting Plaintiff’s JanBot Figure 4 Production Prototype System at paragraph 5 of the 6 Catalano Declaration. Each photo contains a “CONFIDENTIAL” label in the bottom left 7 corner of the photo. In Defendants’ Motion to Seal, Defendants explain that “3DS 8 designated these images as CONFIDENTIAL pursuant to the Stipulated Protective Order 9 entered in this matter. In deference to Plaintiff’s designations of certain documents and 10 deposition testimony as confidential, Defendants file the instant motion to seal.” Dkt. No. 11 397 at 2. 12 Pursuant to this Court’s order, Plaintiff filed a joinder in Defendants’ Motion to Seal. 13 Dkt. No. 449. In the joinder, Plaintiff asserts good cause exists to seal paragraph 5 of the 14 Catalano Declaration—including the text and images provided at paragraph 5—because 15 the JanBot system is “a prototype of 3DS’s Figure 4 Production system from in or around 16 January 2017,” which “has never been commercialized by 3DS and contains an array of 17 3DS’s Enso 2.6 Figure 4 print engines, which 3DS has not made public.”1 Id. at 2-3. 18 Additionally, Plaintiff “contends that both the JanBot system and the Enso 2.6 Figure 4 19 print engines contained in the JanBot system are trade secrets of 3DS,” and if the photos 20 of the JanBot system become public, “they could benefit 3DS’s competitors by revealing 21 details of the layout of 3DS’s JanBot and details of the Enso 2.6 print engine, which have 22 not been made public by 3DS.” Id. at 3. In further support of its joinder in the motion to 23 seal, Plaintiff describes several measures it takes to maintain the secrecy of the JanBot 24 information, including physical security measures at the location where JanBot is kept and [26] 27 1 For clarity, the Court notes that Defendants’ Motion to Seal seeks to redact only the images at paragraph 5, while Plaintiff’s joinder seeks leave to seal both the text and images [28] 1 its policies for encryption, data storage, and acceptable uses of Plaintiff’s information 2 technology systems. See id. at 3. Finally, the images of the JanBot were generated during 3 an inspection of Plaintiff’s machines as part of the parties’ discovery process. Id. Plaintiff 4 agreed to the inspection pursuant to the Stipulated Protective Order and “with the 5 understanding that the confidential and proprietary information reviewed by Defendants 6 would remain confidential and not be made available to the public.” Id. at 3-4. 7 The potential use of records to release trade secrets is an improper purpose sufficient 8 to satisfy the stricter “compelling reasons” standard. See Kamakana, 447 F.3d at 1179 (“In 9 general, ‘compelling reasons’ sufficient to outweigh the public’s interest in disclosure and 10 justify sealing court records exist when such ‘court files might have become a vehicle for 11 improper purposes,’ such as the use of records to . . . release trade secrets.”) (citation 12 omitted). 13 Because the interest in protecting trade secrets from disclosure is compelling, 14 Plaintiff has necessarily satisfied the less demanding good cause standard applicable here. 15 Moreover, the redactions proposed by Plaintiff are narrowly tailored to Plaintiff’s JanBot 16 engine and certain non-public information in paragraph 5 which describes the JanBot’s 17 appearance and functionality. Good cause exists to redact these portions of paragraph 5 18 which disclose non-public information and photographs. 19 IV. 20 CONCLUSION 21 For the foregoing reasons, the Court ORDERS as follows: 22 1. Plaintiff’s Motion to Seal at Dkt. No. 387 is GRANTED. The Clerk of Court 23 is respectfully requested to seal the documents lodged at Dkt. No. 388 in their 24 entirety. 25 2. The Clerk of Court is requested to seal Dkt. No. 399-3 in its entirety. 26 3. By not later than March 18, 2024, Defendants must re-file the Catalano 27 Declaration filed in support of Defendants’ opposition to Plaintiff’s Motion to 28 / / / 1 Compel Forensic Inspection of Defendants’ Electronically Stored Information 2 with redactions to paragraph 5, as follows: 3 a. Defendants must redact the two sentences at paragraph 5, lines 23-25. 4 b. Defendants must redact both images included under paragraph 5. 5 IT IS SO ORDERED. 6 Dated: March 13, 2024 _— 7 Tb Lh, a 9 United States Magistrate Judge